Basically, your entire original purchase price gets allocated to the land, and the cost of the new structure is allocated to the structure.
Example:
Purchase price for house & Lot - $100,000
Demolished house, built new house for $50,000
Cost basis for the land - $100,000
Cost basis for the structure - $50,000
Total cost basis - $150,000
This is just a rough. There are other variables that can come into play. For example, any property improvements you may have done to the old structure, or if you rented out the old structure at any time before you demolished it, that will affect the cost basis.
